Devaluation of naira impacts Flour Mills of Nigeria earnings

LAGOS, NIGERIA – The Flour Mills of Nigeria Plc (FMN) on July 10 reported after-tax profit for the year ended March 31 of 8.8 billion naira ($27.95 million) during 2016-17, down from 14.4 billion naira in 2015-16.

“The growth was driven by a combination of volume increase, enhanced operational efficiencies coupled with commensurate increases in prices of our products,” the company said. “However, the group’s financial performance was adversely affected by the impact of over 40% devaluation of the naira together with uncertainties associated with persistent foreign exchange scarcity and sharp fluctuations in rates which we have been successfully able to hedge.”

The group’s revenue for 2016-17 was 524 billion naira ($1.664 billion), an increase of 53%.

The Flour Mills of Nigeria noted that the past two financial years took a toll and considered the 2016-17 earnings as “very impressive.” In 2014-15, the group recorded a loss of 6.2 billion naira and in turn sold a 50% stake in United Cement Company of Nigeria (UNICEM), which helped improve the bottom line.

The loss continued in 2015-16. The group returned an operational loss of 12.7 billion naira but sold remaining 50% of equity in UNICEM to cushion the loss, but also to give the group a chance to focus on the growth of its core food and agro-allied businesses.

FMN continued its goal to transition from a food processing company to a fully integrated consumer foods business supported internal supply chain via its agro-allied business.

“We believe that this is the most viable and sustainable thing to do to safeguard our future and ensure the sustainability of our business,” FMN said. “The emerging macro-economic environment and government initiatives have necessitated a strong ‘local’ input and output drive and FMN is determined to be a part and major contributor to the government’s backward integration policy.”

FMN continues to focus on restructuring its operations by streamlining its core business. By monitoring and managing costs the group hopes to improve and reengineer its existing product range as well as create new innovations and develop new market strategies.